The Fed has worked through JPMorgan to rescue the enormous, ancient and eminent Bear Stearns brokerage from bankruptcy by intervening in the marketplace to provide loans to finance a 2 dollar per share buyout (for a company that traded at $80/share three weeks ago.)
This is not good. It sets a horrible precedent.
Small brokerage firms just fail. They don't get this treatment. So you would be wise to keep your brokerage account with one of the largest firms for this reason. The risk to you as an investor is lower. This makes it hard for small brokerage companies to be created and to succeed. Things that hurt small businesses are bad because small businesses create most of the innovation and economic growth in the global economy.
The taxpayers get to absorb the risk of default on the loan. Haven't the taxpayers been abused enough yet?
It sends a message to the global community of panic. This will further weaken the dollar, the stock market and the financial system.
This is a very bad precedent.
Perhaps it's time to start buying stock out there. A quote widely attributed to banker Nathan Mayer Rothschild, 1st Baron Rothschild, reads: "Buy when there is blood in the streets."
Could now be that time?
Curt wrote All Your Money in 2007
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